Aghast over gas prices

November 8, 2010 - Bill Speer

Gas prices have skyrocketed again since Nov. 4 - now just hovering below $3 a gallon. According to the AAA of Michigan, gas prices are up 20 cents per gallon over the past week across the state. Prices range from $2.99 a gallon in Alpena to $3.31 in the Benton Harbor area according to the report.

Worse, AAA officials said the price today is 36 cents a gallon higher than what it was this time last year. Talk about inflation! So what's the culprit and reason behind the jump?

According to the internet site GasBuddy.com, the jump can be attributed to three things: the Federal Reserve Board's action last week to inject $600 billion into the U.S. economy, and thus drive down the value of the dollar; a small oil refinery fire last week in Illinois and the price of crude oil breaking $87 a barrel on the market.

"Last week we saw oil prices surpass $87 per barrel after the Federal Reserve announced a $600 billion injection into the U.S. economy, causing the U.S. dollar to lose value, thereby pressuring oil and gasoline prices higher," said Patrick DeHaan, GasBuddy.com senior petroleum analyst. DeHaan said that in addition to the Fed's actions, a Department of Energy report indicated another drop in U.S. supplies against rising demand. "With oil prices breaking out of their well established $75-$85/barrel range, I'm quite concerned we could see prices trade in a higher range, perhaps $85-$95/barrel for several months, signaling higher gasoline prices in the future," he said.

If that is true, the psychological barrier of $3 a gallon could soon be broken - just in time for the holiday season.